In: Tax in Sri Lanka, YA2023/2024


As the financial year in Sri Lanka kicks off on April 1st and runs through March 31st, it’s essential to stay updated on the latest changes in the tax system for the upcoming year. Let’s take a closer look at some key updates affecting individuals, partnerships, incorporated companies, and other entities.

Individual Income Tax (IIT):

  1. Personal Relief: Good news for all residents and non-residents – you now get a tax-free allowance of Rs. 1,200,000. In simpler terms, no tax is owed on the first Rs. 1.2 million of your income.
  2. Rent Relief: If you earn rental income, you can deduct 25% of the total amount.
  3. Solar Panel Deduction: Embracing sustainable energy, you can deduct up to Rs. 600,000 per year for installing solar panels connected to the national grid.
  4. Progressive Tax Rates: Tax rates start at 6% for the first Rs. 500,000 of taxable income and increase gradually. The maximum rate is 36% for incomes exceeding Rs. 3,000,000.
  5. Special Rate for Specific Gains: Certain sectors like liquor, tobacco, betting, and gaming face a higher rate of 40%.

Tax on Partnerships:

  • For small partnerships, there’s zero tax on income up to Rs. 1,000,000. Beyond that, a nominal tax rate of 6% applies.

Tax on Incorporated Companies:

  • Industries like gaming and tobacco are subject to a higher tax rate of 40%, while other corporate incomes face a standard rate of 30%.

Tax on Other Incorporated Entities:

  • Trusts, charities, NGOs, and funds like Employees’ Trust Fund (ETF) and Employees’ Provident Fund (EPF) have specific tax rates ranging from 14% to 30%.

Qualifying Payments:

  • Individuals and entities can deduct certain amounts from their taxable income, with specific limits.

Tax On Value Additions – Value Added Tax (VAT):

  • The current VAT rate is increasing from 15% to 18% starting January 1, 2024.
  • VAT registration is mandatory if taxable supply value exceeds Rs. 20 million in a taxable period or Rs. 80 million over twelve months.

Social Security Contribution Levy (SSCL):

  • SSCL introduces a new structure based on liable turnover, with rates and thresholds specified for different sectors.

Withholding Tax (WHT) and Advance Income Tax (AIT):

  • Various payments, such as service fees, rent, and lottery or gambling winnings, are subject to specific WHT/AIT rates.

Administrative and Legal Changes:

  • Amendments aim to streamline revenue administration and clarify existing provisions.
  • Special tax return requirements for withholding tax on gem sales, mandatory submission of a Tax Identification Number (TIN) for various transactions, and changes in the tax treatment of salary arrears effective from January 1, 2024.


As Sri Lanka embraces these tax changes, it’s crucial for individuals and businesses to stay informed and compliant. If you have any tax-related queries or need guidance, feel free to reach out for assistance. Stay ahead and navigate the evolving tax landscape with confidence!

You agree to receive email communication from us by submitting this form and understand that your contact information will be stored with us.

author avatar
Isura Sirisena

Leave a Reply